New era for global banking, financial industry

The governor of the Central Bank of Kuwait (CBK), Mohammad Al-Hashel, on Tuesday highlighted the sweeping reforms in the world's banking and financial industry.
"The global banking and financial industry is witnessing a new era of structural and regulatory reform aimed at strengthening monetary and financial stability and in the long run establishing overall economic stability," Al-Hashel told the sixth annual Euromoney Kuwait Conference held here today.
Therefore, the regulatory authorities and banking and financial units "should derive benefits from such reforms by adopting the correct approach in developing our banking and financial systems in view of the regional and international experiences, as well as implementing the best international practices taking into consideration the vital role of banks in the national economy and their deep relations with the society," he noted.
He said that the CBK had continued to adjust and, where necessary, improve its oversight and regulation by implementing the regulatory standards issued by Basel Committee for Banking Supervision including Basel III set of financial reforms.
"In keeping with best international practices we aim to strengthen the banking and financial sector's ability to manage and be resilient to risk - thereby reinforcing the pillars of financial stability in the country and without lessening their ability to develop their businesses profitably and efficiently," he elaborated.
Al-Hashel pointed out two elements of supervision that exemplify the CBK's "approach toward macro prudential policies aimed at strengthening the financial stability of Kuwait." Firstly, the CBK last June issued regulations regarding Basel III Capital Adequacy Standard in a final form to both conventional and Islamic banks.
Previously in December 2013, the CBK adopted the regulatory capital structure and the transitional phase for implementation thereof in the light of the outcomes of the Quantitative Impact Study "QIS" that reflect banks' ability to meet Basel III capital adequacy standard requirements.
The Bank is also making good progress in acting other elements of the Basel III reforms such as Leverage Standard and Liquidity Standards based on a well-conceived time-frame incorporating the findings from the QIS study.
Secondly, having identified overheated acceleration in extension of credit to finance residential real estate accompanied by a noted increase in the price of property, the CBK issued in November 2013 instructions to local banks, investment companies and financing companies concerning regulations as they pertain to individual customers.
He said that that that type of financing is identified as being of particular importance bearing in mind the basic needs of citizens and its relevance with respect to the portfolios of individual lenders.
These regulations stipulated the maximum limit of loan to value ratio of the property to be financed to establish the prudential considerations in such type of finance in line with the relevant international standards, he noted.
With the intention to preserve the customers' interests and hedge against risk of market fluctuations, such regulations affirmed transparency upon extension of finance by informing the customer of the rates of interest and return and the effects of any potential changes - especially in case of rising interest rates.
Source: KUNA